Why exception management is taking center stage for supply chain visibility

We all know how important effective exception management is to a supply chain. The ability to quickly identify and address issues ensures smooth operations and,…

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October 24, 20186 minutes read

Oil & Gas

We all know how important effective exception management is to a supply chain. The ability to quickly identify and address issues ensures smooth operations and, at worst, helps your organization deal with catastrophic disruption. In the past, exception management has often been reactive and ad hoc. With the rapidly changing nature of global supply chains, are we about to move from traditional exception management to management by exception?

A perfect storm is occurring within global supply chains. The traditional linear and sequential approach is almost a faint memory as globalization, resource scarcity and cost reduction extends supply chains, creating multi-layered ecosystems that encompass distant and sometimes volatile geographies.

At the same time, customers are demanding increasingly personalized and tailored products. The ‘run of one’ is becoming a reality much faster than anyone could have predicted. Organizations are responding by finding much more collaborative ways of working with a wider range of trading partners scattered throughout the world.

Market volatility and demand unpredictability are combined with an increasing number of disastrous events that potentially disrupt or completely stop the supply chain. A common approach to addressing this challenge has been to increase visibility across every part of the supply chain so that we can see what’s going on—in real or near real-time—and take the appropriate actions.

However, is supply chain visibility by itself enough? Extended supply chain ecosystems create far greater levels of risk and, through that, far greater levels of exception. In addition, you could consider that increased personalization almost makes every customer order an exception in its own right. Modern supply chains are under serious threat of being overwhelmed by exceptions.

From exception management to management by exception

Accenture told Industry Today: “Exception management has become a supply chain growth industry that has spawned armies of supply chain fire fighters dedicated to exception management in many companies. Most of them work in organizational siloes, saddled with IT systems threatened with obsolescence as newer digital technologies enable sophisticated sense-and-react capabilities that can lead to proactive planning”.

It is the move from reactive to proactive exception management that’s important. Global supply chains are just too large and complex to only respond to what has happened—especially where that response is slow and inefficient because of paper-based processes. Organizations that deliver real-time visibility across their supply chain can begin to move to proactive exception management where operations, planning and risk management are driven by exception.

Supply chain visibility allows your organization to know where all your inventory is at any moment and give full access to information on every aspect of the supply chain that can improve process efficiencies and remove redundancy. This provides the basis for managing by exception where you are immediately providing with alerts or notifications—based on business rules—whenever an exception occurs or, indeed, is about to occur.

In this way, you can improve planning, reduce inventory and mitigate risk across your entire supply chain. You can more quickly mobilize your supply chain operation should a catastrophic event occur and ensure higher levels of supply chain performance that will lead to enhance customer satisfaction. Accenture recently found that 71% of global CIOs believe the primary function of their supply chain by 2020 will be as a customer service driver, so this ability to better manage exceptions becomes more important for every organization.

A technology platform for management by exception

Managing by exception is, in essence, a data management challenge. You must be able to centrally manage all the data passing through your B2B processes. You need accurate and up-to-date information on supplier and customers performance—and the documents being exchanged—to resolve issues quickly or, more important, catch them before they occur.

A technology platform for management by exception must include:

Business process enforcement
The platform must allow you to capture and model the business rules that set out how you handle exceptions. It must be able to support your specific policies and procedures as well as establishing exception rules for individual partners and trading partner groups.

Transaction Validation
The platform must allow you to validate data at the individual transaction level, intercepting supply chain transactions such as advance shipment notifications (ASNs) and validating them against pre-defined business rules. The system will evaluate all inbound and outbound digital transactions against documented rules and requirements, flagging errors and issues with drill-down to root-cause data.

Alerts & notifications
Exception management capabilities can be as simple as enabling real-time email alerting when problems occur. However, the platform should include a flexible workflow engine that supports more complex exception management processes, including generation of production issues and alerts for exceptions that users are expected to take action on.

Data Quarantine
Bad data entering back office and enterprise systems such as ERP can be a nightmare both internally and externally through charge backs caused by sending bad data to a partner. In fact, estimates put the cost of bad data at an astonishing 15-25% of turnover for most companies. The platform validates all information passing through your B2B processes. Data passing validation is immediately released for delivery while data failing validation can kickoff a workflow that will enable you to reject or remedy bad data—preventing issues before they are costly.

Online reporting and analysis
Automated reports provide visibility to partner performance and key metrics. Reports can be customized, shared, subscribed to, exported and drilled into, making it easy for you to collaborate with partners on issues. In addition, partner and supply chain performance can be displayed on interactive scorecards.

A leading technology for exception management is OpenText™ Active Intelligence. It’s is a cloud-based service that provides proactive exception management by monitoring your B2B transactions in real time to ensure that they are accurate and comply with your business rules. The service alerts you when your transactions are not accurate or do not comply with your business rules, providing you with the critical visibility across your supply chain and the ability to take a centralized approach to management by exception.

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